Parking Revenue Declining, London Borough Lures Back Drivers

The City of Westminster is one of 32 London boroughs, just west of the city center.

If you think borough-level politics is messy in New York City, consider London, a city of 32 boroughs, each with its own local government. On a visit to interview Eric Manners, an urban planner working for the borough of Islington last spring, I was struck that a municipality with just about the same population as a New York City Community Board district had its own City Hall, a staff of urban planners and traffic agents and even owned and ran its own little fleet of street sweepers. It made me realize that despite how humongous and onerous New York City government often seems to be, neighborhood-level governance is virtually non-existent compared to London’s.

Waiting in the lobby of Islington City Hall I noticed that virtually every other person in the room had come to apply for a residential parking permit. Parking permits, Manners told me later, are a significant source of revenue for the borough and one of the key ways in which London’s neighborhood-level governments manage and control their own streets and public spaces.

With congestion pricing and residential parking permits under discussion in New York City, it was interesting to see this article in the The Times of London the other day. Apparently, London’s congestion pricing system has been a bit too effective for the borough of Westminster’s conservative City Council. According to the Times, Westminster makes more money from parking than any other local authority in England but has experienced a 12 percent drop in the number of people using its public parking facilities since the start of congestion pricing. The City Council is now trying to lure traffic back into the borough with a variable pricing scheme modeled on discount airline ticket pricing.

Danny Chalkley, cabinet member for economic development and transport on the Conservative-controlled council, said that the authority had received advice from easyJet about its new pricing regime, with Alastair Gilchrist, the director of parking, a former easyJet executive.

Mr Chalkley said: "We know that many drivers in London are put off by expensive parking charges. Now they will be able to park much more cheaply on a first come, first served basis. "They won’t be able to predict what they will pay before they drive in but we think it will lead to more people taking the chance that they will get a very good deal."He said that the charging system would favour shoppers rather than commuters.

Transport 2000, the green lobby group, said that the idea may undermine the benefits of the congestion charge, which has resulted in 20 per cent fewer cars entering the charging zone. Stephen Joseph, its director, said: "The last thing Westminster and the West End need is a big increase in cars attracted by heavily discounted parking fees. "This is not even in motorists’ interests because it will lead to great uncertainty about how much their trip will cost them. It could also result in perverse behaviour, such as people driving around in circles waiting to see if the price drops."

Earlier this year Westminster announced that parking meters would be removed and replaced by a cashless mobile phone payment system. Drivers can send a text message to pay for extra time if they are running late.

Another insightful piece. This is reminiscent of the suburban lust for real estate tax revenue from new development to support ever the increasing costs of schools, roads etc. It’s another reminder that transportation fees should be based on achieving policy goals like reducing car use and congestion rather than maximizing revenue. As the London enviros suggest, the externality costs of Westminister encouraging car through discounted parking will no doubt outweight any revenue gains. Incidentally, is there any discussion about the impact on commercial vehicle deliveries and curb access?

@alex

It’s interesting to see a plan for variable parking pricing, though. This is one of the key points in Vickrey’s principles of efficient congestion pricing (http://www.vtpi.org/vickrey.htm):
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8. Curb parking, where permitted at all, should be charged on the basis of clearing the market.

In principle the price should be made to reflect as closely as possible the marginal social cost of the occupancy of a space in terms of the cost to other would-be parkers of added difficulty in finding a space, or of having to resort to other modes. In practice, this could be approximated by a rule saying that if, over a suitable number of weeks, fewer than, say 5% of the spaces are typically vacant during a particular time slot, the charge should be increased, and if vacancies are consistently more than, say 20%, the charge should be reduced, or eventually eliminated. Charges may appropriately be made to vary with the size of the vehicle.
———————————-

Now, there may be a conflict between selection of optimum pricing to maximize revenue (hopefully what Westminster borough plan to do) and optimum pricing to keep something between 5 and 20% of spaces vacant, but I wouldn’t be so sure that this is the case, and it may even be the case that the two optima are very close indeed.

One of the things we need to remember is that congestion pricing (for traffic or parking) is a tool to bring market efficiencies and rationality to traffic management. Our current systems are so irrationally automobile-centric that applying these tools will generally reduce automobile traffic; but it may be the case that in London, enough of a corrective has been applied that increasing efficiency and rationality may actually nudge automobile traffic higher.

The problem of externalities (Westminster borough doesn’t have to provide national health coverage for the victims of traffic accidents, or children with asthma) is a real one, but I suspect that if they take the challenge as “maximizing revenue from parking permits” rather than “increasing parking utilization” they may well end up increasing the parking fees at peak times and reducing traffic even further.

JK

It maybe that the Westminister people are introducing a dynamic pricing system to achieve a target curb occupancy level. If this is the case, NYC should watch carefully.

But it’s not clear from this piece if they want a higher curb side occupancy rate or more revenue — not the same at all. It sounds like they are complaining about not enough curb use, and want to lower prices to encourage more parking and more shopping.

Don Shoup identifies 85% curb occupancy as the rate at which cruising for parking disappears and curb use is maximized — and the greatest “social benefit” is achieved. But, Shoup has also shown that 85% occupancy is usually achieved at a much lower revenue level than the revenue maximzing price.

The main externality to watch here is traffic delay caused by more parking movements and the impact on commercial vehicles. All this said, I bet Westminister is like Soho and 95% plus of shoppers arrive on foot, bike, and transit.

However lastly, fundamentally, pricing streets or parking is about reducing demand for a finite good. Higher prices mean less demand and less driving.

@alex

I’m curious – Shoup says 85% occupancy is achieved at a lower revenue level than revenue maximizing price; but is this lower revenue level associated with higher prices (that reduce occupancy more than the price increases) or lower prices?

Another detail from the original Times article is interesting: “The cost of a space will be displayed on a digital screen at the entrance of the car park and linked to a vehicle counter. Motorists who arrive when the car park is virtually empty will pay only 50p an hour or £3.99 for the whole day but those who turn up when it is almost full will pay £4 an hour or £33 for the day.”

Firstly, they are apparently not talking about curbside parking, but rather some sort of municipal parking lots. Secondly, this indicates that the proposed change in pricing is only downwards (£33 is the current max daily charge). But most interesting is that the rate is fixed by the arrival time of the motorists, rather than varying throughout the day as demand changes. This makes sense from the point of avoiding uncertainty (you may not know what parking will cost when you leave home, but at least you will know once you arrive at the lot) but it introduces some other incentives as well.

Naively, one might think that this would encourage people to arrive at the parking lot earlier (when it is more likely to be empty). Depending on the times that lots start to fill up, this could increase or reduce traffic congestion. It could also create perverse incentives – if you arrived when the lot was nearly full, but it has emptied out, you could save a lot by leaving and re-entering

I’m also puzzled to understand how this would “favour shoppers rather than commuters” since commuters would be the most likely to shift to an earlier arrival to “lock in” a lower (by up to 88%) rate. (I suppose it is possible that lower occupancy – and rates – on weekends and holidays might favor shoppers over commuters.)

As for the motivations of the project, the article seems to be of two minds: it is “an effort to boost its revenue” but the council also hope to “attract 30 per cent more drivers” (more than offsetting a 12% decrease since congestion pricing was introduced). I suspect that they hope to do both by playing on the psychology of drivers who think they might get a good deal (but almost never will) – because no matter how “rational” market-based pricing systems may appear, it’s always important to remember that people are often “irrational” in their economic choices.

What I am hearing in London’s Westminster is bad policy. First and foremost parking citations are not supposed to be a cash cow for government, but a tool for managing the shortage of parking. Violations, and the money they generate are indicators of either poor parking conditions and/or poor quality of enforcement. The goal should not be to play with people and create competition and chaos for parking spaces. Mass transit is being used and London’s car population is decreasing. By issuing more permits the government is manipulating policy and making something that is positive into a negative. While the EU has made great strides and taken a leadership role in the reduction of greenhouse gases, this news is a bit of an oximoron.

steve

“First and foremost parking citations are not supposed to be a cash cow for government, but a tool for managing the shortage of parking.”

Why is that, Don Norte? NYC real estate is some of the most valuable in the world. One occasionally finds people who sleep in vans parked for free on the street. Why shouldn’t the city charge for parking spaces? You are assuming that anyone who drives a car into NYC somehow has a special interest in the public space and has a right to have the parking spaces “managed” for their benefit? What about the interest of those who live in pay NYC and pay taxes to maintain the roads, but don’t own cars–don’t their interests count in how these parking spaces are managed?

Congestion pricing is an excellent methodology to give a disincentive to people who drive. Unless I misunderstood the article, it seemed that the strategy of charging more for parking was in fact working and reducing demand and freeing up spaces.
When I referred to managing parking it wasn’t to say people should not pay for parking. Many local governments use preferential parking permits to do that. The article mentioned parking permits “are a significant source of revenue for the borough and one of the key ways in which London’s neighborhood-level governments manage and control their own streets and public spaces.”
Very well. My point was to comment on the fact that the pricing of parking, which lead to a decrease in demand, and opened up parking spaces is defeating the purpose if people are lining up for parking passes, presumably to fill the vacant spaces that are now available because of the pricing strategy that was implemented for the very purpose of discouraging people from driving in Westminster.
I support the concerns raised that pricing should in fact remain fairly constant and not give discounts. Cities should not encourage people do drive when mass transit is available.

I agree with the gentleman who said “the idea may undermine the benefits of the congestion charge, which has resulted in 20 per cent fewer cars entering the charging zone. Stephen Joseph, its director, said: “The last thing Westminster and the West End need is a big increase in cars attracted by heavily discounted parking fees.”

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